Two federal lawsuits take aim at the new overtime rule

Employers should continue preparations for the December 1, 2016, effective date

Posted September 23, 2016

On September 20, 2016, two separate groups filed federal lawsuits in an effort to either delay the effective date or completely stop the implementation of the final rule revising overtime pay.

In May 2016, the Department of Labor (DOL) published a final rule which raised the minimum salary requirement for employees classified as exempt under the executive, administrative, and professional categories — the “white collar” exemptions — of the Fair Labor Standards Act (FLSA). The new required salary level of $913 per week or $47,476 per year, which will be required beginning December 1, 2016, more than doubles the current minimum salary of $455 per week ($23,660 per year). The new rule also includes a scheduled salary increase every three years.

Legal challenges

The first lawsuit came from a group of 21 states filing in the United States District Court for the Eastern District of Texas requesting a permanent injunction of the rule. The lawsuit asserts that the overtime rule is an unconstitutional attempt to “dictate how state and local governments allocate their budgets” by increasing the minimum required salary level without authorization from Congress.

The lawsuit also alleges that the rule’s automatic increases are a violation of the FLSA’s requirement for public notice and comment periods before such changes can be made.

The second lawsuit was filed by a partnership of more than 50 business groups. They also take issue with the automatic salary increases every three years, but were more concerned that the DOL raised the salary level too dramatically, which ultimately causes the exemption to be lost for entire categories of employees who perform job duties that qualify them to be treated as exempt.

The business groups have asked for the court to vacate the rule, but at the very least, requested the December 1, 2016, effective date be postponed pending a review by the court.

What does this mean for employers?

While it is unclear how the courts will rule on these lawsuits, employers should continue to assess the scenarios in their organizations and make preparations assuming the December 1, 2016, implementation date will stand.

This article was written by Mike Henckel of J. J. Keller & Associates, Inc.